Virgin Rail to run West Coast franchise until end of 2014

As the Department for Transport (DfT) hopes to put the West Coast Mainline franchising debacle behind it, the government has announced that current operator Virgin Rail Group (VRG) will continue to run the trains until November 2014.

VRG, the joint venture between Stagecoach and Virgin Group which has run the West Coast franchise since 1997, saw its £4.8bn bid to renew the contract bettered by FirstGroup's £5.5bn bid in August.

However, the DfT was prompted to drop the FirstGroup takeover back in October with Transport Secretary Patrick McLoughlin announcing that the department had found "significant technical flaws in the way the franchise process was conducted."

The DfT announced on Thursday morning that VRG will continue to operate rail services on the West Cost Mainline for up to 23 months, after which the contract will be let under a long-term franchise.

McLoughlin said: "We are determined to ensure not only that passengers continue to experience the same levels of service they have in the past, but that services improve. There will be a new hourly service linking Glasgow and London and we will also work with Virgin Trains to explore other service improvements.

"I am also extremely pleased that passengers will benefit from up to 28,000 more seats daily thanks to the delivery of 106 new Pendolino carriages onto the West Coast Main Line which has happened on budget and ahead of schedule."

"Good deal"

Stagecoach released a statement welcoming the decision, saying that the VRG joint venture will initially earn a fee equivalent to 1% of revenue with the DfT taking the risk that revenue and/or costs differ from those currently expected.

"However, VRG and the DfT have also agreed to seek to negotiate revised commercial terms that would see VRG take greater revenue and cost risk for the period to November 8th 2014 for a commensurate financial return," Stagecoach said.

The company's Finance Director Martin Griffiths said the deal was "good" for passengers and taxpayers. "It will ensure customers continue to benefit from the best customer service on the UK rail network and it brings continuity for our people. Our agreement also gives value for money to taxpayers and an appropriate return to the shareholders whose private investment underpins Britain's rail system."

He said: "While this has been a difficult few months, we believe the future prospects for the West Coast franchise and the wider rail network are very positive. It is now crucially important that the rail franchise programme gets back on track on a sustainable basis as soon as possible."